UK leadership speculation raises wealth tax fears and bond market risks, warns deVere CEO
Andy Burnham’s win in Makerfield, paving the way for him to potentially challenge Keir Starmer and become UK prime minister, could trigger a Liz Truss-style spooking of UK bond markets and accelerate a mass exodus of wealth from Britain, warns the CEO of global financial advisory giant deVere Group.
The stark warning from Nigel Green comes after Burnham secured a dominant victory in the Labour stronghold, reigniting speculation about his future leadership ambitions and raising questions about the future direction of Labour economic policy.
Nigel Green says investors are likely to view Burnham’s growing influence through the prism of taxation and public spending.
“Burnham’s victory materially increases the likelihood of Britain moving towards wealth taxes, and other measures, aimed at private capital.
“Investors notice shifts in political probability long before policies reach Parliament.
“A politician who can defeat Reform UK in Labour heartlands and emerge as a credible future prime minister becomes impossible for markets to ignore.”
He continues: “Burnham’s success makes future tax raids on wealth appear more plausible than they did a week ago.
“Capital gains tax, inheritance tax, and wealth taxes.
“Each becomes more urgent to discuss politically if Labour moves further in that direction.”
He warns that Britain’s fiscal position leaves governments increasingly tempted to target wealth.
“The UK’s debt burden remains enormous. Public spending demands continue to rise. Economic growth remains weak.
“At some point governments start looking for additional sources of revenue.
“Wealth becomes an obvious target.”
Nigel Green says a wealth tax could create consequences extending far beyond those directly affected.
“The risk isn’t limited to the tax itself. Wealth taxes change behaviour. They encourage capital and entrepreneurs to move. They encourage successful families to examine alternatives.”
He argues that policymakers often underestimate how quickly those decisions can be made.
“Wealth is considerably more mobile than many politicians realise. A successful entrepreneur can relocate.
“A business owner can relocate. An investor can relocate. Capital can relocate overnight.”
Nigel Green says discussions around wealth taxes frequently lead to wider debates about preventing wealth from leaving.
“Once wealth taxes enter the political mainstream, discussions about exit taxes are never far behind.
“Governments quickly discover a problem: if wealthy people can leave, tax revenues can leave too.
“An exit tax is designed to stop that happening.
“Those conversations would have sounded far-fetched a few years ago.
“They no longer do.”
He also warns that investors should not underestimate the potential reaction of bond markets.
“The Liz Truss mini budget crisis of 2022 demonstrated how brutally gilt investors can react when confidence evaporates.
“The lesson wasn’t about left or right, it was that bond markets punish fiscal risks.
“They punish governments whenever investors begin questioning economic credibility.”
Nigel Green believes a future Labour leadership contest involving Burnham would inevitably trigger closer scrutiny of Britain’s long-term fiscal outlook.
“Markets will want to know how a Burnham government intends to fund its ambitions.
“If investors conclude the answer involves more taxation of capital, more pressure on wealth and weaker incentives for investment, government borrowing costs could come under pressure.”
He says deVere is already seeing growing concern among internationally mobile clients.
“We are seeing more affluent families reviewing residency options, more discussions around international diversification, and interest in protecting wealth across multiple jurisdictions.
“Political developments such as this accelerate those decisions.”
Nigel Green concludes: “Britain cannot afford a sustained exodus of entrepreneurs, investors and capital at a time when growth remains fragile.
“Yet policies aimed at wealth make that outcome more likely.
“People who wait until wealth taxes are announced have often waited too long, likewise for exit taxes.
“The most effective planning takes place before governments act, not afterwards.
“Makerfield may prove significant because it increases the probability of exactly the sort of political shift that wealthy families and investors have been preparing for.”